The risks involved in selling illicit cigarettes have risen substantially as, for the first time ever in the UK, a retailer has been found guilty of intentionally selling dangerous cigarettes. Until now, any UK retailer caught selling "cheap whites" has been prosecuted for tax evasion, but Shapoor Atiqi from Boston Food and Wine Centre in Lincolnshire, has been found guilty of eight offences, including the sale of non self-extinguishing cigarettes. He was sentenced to 270 hours of community work and fined more than £5,000.
Since November 2011, all cigarettes have had to comply with the European Standard EN 16156 and EN ISO 12863, which require them to be self-extinguishing.
Emma Milligan, senior trading standards officer at Lincolnshire Trading Standards, comments: "Mr Atiqi had almost 1,000 Jin Ling cigarettes, which were of particular concern to us. Jin Ling is an illicit brand of cigarette not made to European standards and therefore illegal in Europe.
"We believe that this type of cigarette caused a house fire in Spalding in which one person died, and during the course of the inquest the Coroner raised serious concerns about the sale of illegal cigarettes in the area, hence why we have been cracking down on sales of this product."
At the trial, Keiron Davey, community fire protection manager at Lincolnshire Fire and Rescue, explained how legal cigarettes are now designed to go out if they are not repeatedly smoked, for example, if they are left burning in an ashtray. He said they have thin bands of paper or ’speed bumps’ at intervals down them to ensure they go out if the smoker does not regularly inhale from them.
Meanwhile, availability of non-duty paid cigarettes is on the rise. Latest research from MS Intelligence’s Empty Pack Survey reveals that 21% of cigarettes consumed in the UK last year were non-duty paid and came from outside the UK this has increased from 16% in 2011.
Pete Nelson, Imperial Tobacco’s anti illicit trade manager, comments: "These latest figures are extremely concerning as the illicit tobacco trade continues to increase, benefiting no one but the criminals involved. They target children, deprive the government of tax revenues and expose consumers to poor quality products which are not manufactured to the same high standards as genuine products and do not comply with all regulatory requirements."
He adds that almost £3bn is being lost in tax revenue from tobacco smuggling, which equates to £8m a day being lost to the treasury.
"Another consequence is that successful age verification campaigns such as No iD No Sale and Citizencard are being undermined in an illegal environment as the criminals directly target children when peddling their illicit tobacco. Their activities are now costing the average convenience store over £40,000 per year (based on IGD research 2012 & MS Intelligence Empty Pack Survey 2012) in lost sales equating to over 5,500 (based on Lambert & Butler king size 20s at £7.19) lost tobacco purchases a year or over 100 missed sales a week, to say nothing of the lost impulse purchases from other categories generated by tobacco.
"Continual tobacco duty rises in this country are increasing the temptation for smokers to buy illicit tobacco products. The average price of a pack of 20 cigarettes is around £7.75 in UK shops; compared to the street price of illicit cigarettes of between £3 and £4 per pack. More than one in five cigarettes consumed in this country have had no UK duty paid on them and the situation will only get worse, unless all parties involved work co-operatively to stem this increasing trend in illicit trade."
Ronald Ridderbeekx, acting head of corporate and regulatory affairs at BAT, says his company has been committed to helping combat illegal smuggling for many years. "We provide intelligence to HMRC to aid with the formulation of their anti-smuggling policies and additionally we have teams working with border forces around the world.
"However, the importance of retailer assistance in this fight cannot be over-stated. We encourage any retailer aware of illegal tobacco sales and smuggling to report this to the Customs hotline on 0800 59 5000. Calls remain anonymous and the information provided will help to stamp out crime in our communities."
Take a stand
Jeremy Blackburn, JTI head of communications, agrees saying retailers should make a stand by mobilising against the illicit traders: "Reputation is very important for independent retailers shops selling ’illicit tobacco’ are undermining trust and confidence in the independent retailer." He says retailers can play a major part in protecting their businesses from criminals that steal customers and profit from them on a daily basis by calling the hotline.
The illicit tobacco trade is just one of the subjects covered in Imperial Tobacco’s new-look website, where you can read articles, download category information and will soon be able to hear audio and see video clips.
Unfortunately, the high price of duty-paid cigarettes means they are still a magnet for thieves. Every day regional newspapers across the UK feature stories of raids on stores where the target has been cigarettes. For example, last month a Shell garage in Aldershot was targeted. Three men broke in between 11pm and midnight on May 9 and stole a large quantity of cigarettes.
And it’s not only retail outlets cash and carry car parks are often prime crime locations. Writing in The Grocer recently, Steve Parfett, chairman of AG Parfett & Sons, said the "criminal fraternity were very active in our car parks targeting and threatening customers opportunistically".
Such is the problem that the Federation of Wholesale Distributors (FWD) teamed up with Imperial Tobacco and Parfett’s Stockport branch to test cash and carry customers’ understanding of risk, particularly when loading their vehicles with high-value goods such as cigarettes and tobacco. The FWD Criminal Intelligence Database, which records crimes against wholesalers and their customers, has identified this as a weak point in the supply chain despite members’ security measures and warnings to customers.
Flyers and posters with the ’Who’s Watching You?" message were distributed around the depot and car park, and security experts visited the branch to pass on advice about how to avoid theft. Tobacco customers in particular were urged not to leave stock unattended, and to think about how to load their vehicles to avoid leaving higher-value items exposed.
Customers were also given advice on what to do if they thought a vehicle was following them back to their own premises.
A survey after the trial revealed a much higher level of awareness of risk, with many customers saying they would change their behaviour in future, for example by parking nearer the building, visiting during daylight hours, and watching out for suspicious activity in the car park.
Tobacco trends
There’s no doubt that consumers are demanding increased value for money in everything they buy and that includes smokers buying cigarettes.
Earlier this year, JTI extended its successful Sovereign brand with a new cigarette range with a sub-£6 price point. Sovereign Blue comes in both king size and superkings in 10s and 19s pack formats, with a £5.99 price-marked pack available for both 19s packs. In addition, king size 10s are available in a £3.25 price-marked pack and superkings 10s in a £3.28 pack. Blackburn comments: "The value cigarette sector is set to continue its growth throughout 2013, so it’s important that we continue to develop value products that deliver sales for retailers.
"The new Sovereign Blue £5.99 price-marked packs offer retailers a chance to capitalise on this growth area, with a quality product from a trusted brand with a strong British heritage."
Meanwhile, after last year’s launch of Rothmans gold and silver, BAT has repositioned the range with lower price points. The changes mean Rothmans gold and silver kingsize are now available at £5.99 rrp, super kingsize £6.04 rrp and 10s at £3.12 rrp. The company says retailers still benefit as cash margins remain the same as for the previous price points.
Rolling your own cigarettes has always been a cheaper way to smoke than buying tailor-mades, but even roll your own (RYO) smokers are looking for better value.
BAT reports that its Pall Mall RYO saw "incredible volume growth" of 71% in independents in the full year 2012 versus 2011 (Nielsen data).
"Offering the right brand, the right blend, at the right price, Pall Mall RYO meets the growing need for value-for-money quality tobacco from an internationally recognised brand," says Ridderbeekx.
Meanwhile, Scandinavian Tobacco Group (STG) has just launched its lowest price point yet for its Salsa brand a £3.15 12.5g price-marked pack (PMP). The company says the new pack positions Salsa as the cheapest RYO product in the convenience channel, offering excellent sales margins for forecourt retailers and incredible value for consumers.
lan Graham, head of marketing at STG, says: "As well as being extremely attractive to consumers with its low price point and, as a result, benefiting from a strong rate of sale, the Salsa half outer has the cheapest out-of-pocket spend for retailers on a 12.5g RYO variant in the convenience channel. With this in mind, any forecourt retailers looking to make the most of the growing demand for value RYO should make sure they stock up on the new £3.15 Salsa PMP while stocks last."
Graham says the value-for-money trend took longer to develop in the cigar category but reckons there is now an established market for cigars that meet this need. In response to this we launched Moments, a cigar range with a low price point that meets the needs of cash-conscious consumers. The range is available in two variants, Moments original and Moments blue, the latter of which has already taken up the position of sixth leading miniature cigar since its launch a year ago (SIG data)."
New look
Lambert & Butler (L&B), which currently accounts for 10% of all cigarette sales in the UK (Imperial Tobacco figures), has a fresh new look, which brand owner Imperial Tobacco believes will enhance its appeal to premium cigarette adult smokers.
L&B brand manager, Rebecca Ivey, explains: "When people are paying £7 or £8 for a packet of cigarettes, they expect the pack to look like it costs £7 or £8. Most of the cost of a packet of cigarettes is tax. We can’t control the tax but we can control what the pack looks like."
With a bold new logo and new pack variant communication, the standard core range will be available in original, smooth (previously gold) and menthol. The new design will also feature on Glide Tec and Fresh Burst packs.
Ivey says this design consistency will improve shelf stand out and aid retailer navigation through the new L&B colour scheme. With a sub-premium price point (£7.45 for 20) and no price point change, Lambert & Butler offers margins of between 6.1% and 6.25%.
Over at JTI, the Camel brand is celebrating its centenary this year with a series of limited-edition packs. Rolling out nationally across Camel Blue 20s now, the packs will be available for two months while stocks last.
To support this milestone, JTI is running a competition where retailers can win a trip to New York.
To take part, retailers simply need to complete an entry form, attach three Camel outer barcodes and send them to JTI. The forms are available from selected cash and carries during this month and within the trade press throughout this month and next. Retailers must return their completed forms and barcodes by July 31 for a chance to win.
Launched in 1913, Camel is a global premium American blend cigarette and is sold in 110 countries worldwide. Particularly popular within major cities across the UK, Camel currently sells almost seven million packs every year here (Nielsen) and continues to grow its share in the premium cigarette sector.
JTI’s Blackburn comments: "The brand’s current success, combined with the opportunity for generous profit margins provided by premium cigarettes, makes the new limited-edition packs a must-stock for tobacco retailers."
Marlboro blasts off
Philip Morris UK is launching Marlboro Ice Blast, which it describes as "the first fresh-to-fresh capsule cigarette".
Ice Blast is a cooling-to-high-cooling capsule cigarette where smokers will be able to enhance their smoking experience by clicking the "Iceball", which delivers a crisp, menthol taste.
Zoe Smith, marketing director at Philip Morris, says: "The capsule market has been steadily growing since the start of 2012, when the first products were introduced.
"Currently capsules represent almost 1% of total cigarette volume, seeing a month-on-month sales growth of around 5% (Nielsen). Since the launch of the capsule segment, sales of £73m have been generated, so there is a huge opportunity to further grow the Marlboro brand and further establish ourselves with adult smokers."
Marlboro Ice Blast is available in packs of 20 kingsize sticks only, with a rrp of £8.02.
Retailer View
Jason Tamplin, Symonds Forecourts’ Budgens of Wells:
"Tobacco is still important and accounts for around 16% of our sales but it’s not the footfall driver it once was.
"Lambert & Butler is still the best seller across cigarettes, and Cutters Choice and Golden Virginia 12.5g are the better sellers across roll-your-own.
"There has been a big shift to lower-priced cigarettes; customers are buying more of the 10s and not so many of the 20s packs. There has also been a shift into roll your own.
"We don’t stock any price-marked tobacco. It’s important to have the balance on sales and profit, so we stay away from price-marked.
"We’re not concerned by our tobacco display being covered as it will affect everyone so it’s an equal playing field, we will just need to look at new ways of driving profit. It will be important to train the staff quickly to know where the brands are to ensure queuing time doesn’t suffer. And I’m not too sure about plain packaging yet, but the key for us is that we correctly implement any legislation.
"We see tobacco reps about once a quarter, they generally come and check the range we have but also inform us of any new products that are coming out.
"We stock e-cigarettes. They are selling well and it does seem to be a growing market. With cigarette prices getting higher, people are looking at different options and the e-cigarettes look likely to become a popular choice."
Zig-Zag’s big deal
Republic Technologies’ Zig-Zag brand has been high profile recently thanks to it becoming an official partner of Premier League Darts, Britain’s biggest indoor sporting event, and will continue to be so thanks to its link with the World Darts Championship in December.
Zig-Zag has benefited from branding on set at each televised Premier League event as well as on player patches at the World Matchplay, programme advertising, sampling rights and hospitality throughout the competition. The World Darts Championship is the biggest tournament, where 72 of the world’s best professional darts players will gather in London. Darts remains one of the UK’s most popular spectator sports with TV audience figures second only to football. It now attracts an estimated TV audience of 12.5 million viewers.
"This is a massive brand profiling opportunity. We are delighted to build on the success of last year’s Swan sponsorship by aligning Zig-Zag, which has huge growth potential, with Britain’s highest profile and most popular indoor sporting tournament. The partnership provides a major platform for us to connect with our customers," says Eleni Koulara, Republic Technologies’ marketing manager.
As part of the sponsorship, darts supremo Eric Bristow (pictured) appeared on the Zig-Zag stand at this year’s National Convenience Show in Birmingham.
New line off the block
The latest product to help people give up smoking is NicoBloc99, a viscous liquid made from natural food-grade ingredients that when applied to the filter of a cigarette blocks up to 99% of harmful tar and nicotine.
The manufacturer says quitting happens over a short period of time (approximately six weeks), gradually reducing the body’s dependence while simultaneously protecting the user from common withdrawal symptoms.
NicoBloc99 does not add anything chemically to the cigarette smoke but cools it down as it’s pulled through the filter causing the tar and nicotine vapour to condense into solid form and become trapped inside the cigarette filter.
Guy Revis, managing director at NicoBloc, says: "NicoBloc99 offers those preparing to quit smoking an alternative nicotine-free choice that enables them to take control and stop smoking at their own pace, gradually weaning themselves off nicotine addiction and reducing consumption until they are ready to stop smoking altogether. This has the added benefit of avoiding many of the withdrawal symptoms that many smokers fear."
NicoBloc99 is not a medicine and does not require medical licensing and so is available to all retailers. A range of POS is available to help maximise sales.
Recommended retail price is £19.99.
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